International Securities: New exclusive redemption solution for Fund Linked Notes

08.11.2022

Clearstream has launched a new and unique redemption option for Fund Linked Notes (FLNs) issuers. FLNs are notes issued in Eurobond format and that have mutual funds as the underlying asset and were previously limited to redemption in cash only.

Choice

Upon redemption, issuers will now have the option to redeem notes in cash or physical units in the underlying fund, as opposed to the previous cash-only option.

This new and exclusive Clearstream enhancement is designed to support issuers and investors with greater, more efficient and diversified opportunities in the structured products investment space.

Steady growth of Eurobonds in APAC

Eurobonds have become an essential component of the issuers financing toolkit for both global, established corporates and for emerging market participants looking for efficient access to liquidity. The steady growth of international investor appetite for APAC credit is an important element in the appeal of the Eurobond market for borrowers from the region.

How does it work? Issuance in Clearstream

The FLN acceptance phase outlines specific requirements in terms of issuance eligibility, ISIN acceptance and redemption procedures.

  1. The issuer (or its Agent) shall check the eligibility of the FLN Underlying Fund (“Underlying Fund”) in the Clearstream system via Clearstream’s website before requesting the ISIN of the FLN. The FLN will be primary issued through and primarily deposited with Clearstream as Issuer-ICSD.
  2. The issuer (or its Agent) shall confirm to Clearstream the Underlying Fund ISIN and name in the draft/final issuance documentation and send it to the New Issues Team Singapore.
  3. FLN will be assessed based on the ability to handle a physical redemption.
  4. The issuer (or its Agent) will be requested to sign an acceptance criteria acknowledgment document.

FLN redemptions in funds (or in cash if any) will be processed onto Clearstream’ clients’ accounts holding the FLN ISIN, as per the standard Clearstream corporate action procedure.

Contact information

For more information, please contact your Relationship Manager or the Eurobonds Business Team.